Take the Leap into Long-term Care Pharmacy
Every day, the pressures of increasing competition and declining reimbursements squeeze community pharmacies a bit more. To ease that strain, many independents are seeking additional sources of revenue. And increasingly, they are finding that alternate site pharmacy — which includes long-term care, home infusion, and specialty pharmacy — is a particularly attractive option.
Independents and LTC Pharmacy: A Great Match
Independent pharmacies are able to compete successfully in the LTC pharmacy market because of their community relationships. Most already fill prescriptions for residents of various LTC facilities through their retail pharmacy, so creating a “closed-door” operation that only serves the LTC market is relatively uncomplicated.
That’s how it was for Jonathan Brunswig when he opened LTC Specialists pharmacy in Scott City, Kansas. Brunswig already owned three retail stores, also in Kansas, that served patients in five different nursing homes.
“The hardest part about transitioning to a closed-door environment was setting it up and transferring patient records to a new system,” Brunswig says. “After that, we just let it run.”
So why take existing business and transfer it to a separate operation? Brunswig says that the closed-door pharmacy provides these key advantages:
- Lower operational costs because of centralized operations
- Eligibility for discounts and rebates as part of a group purchasing organization (GPO)
- The ability to offer customized, focused care, which over time leads to higher revenue
A downside is that LTC pharmacy is a highly regulated environment, with a complex claims authorization and adjudication process. It is also a labor-intensive business that involves high-touch services such as ongoing quality assurance checks, emergency drug delivery, in-service training programs and consultant pharmacist services. What’s more, regulations set to take effect in January 2013 will impose a few new challenges.
Despite those negatives, Brunswig says that LTC expansion still makes sense — primarily because of the advantages of group purchasing. “You just have to find a GPO that fits your business model,” he explains.
Another key to success is establishing access to a “good bed count.” That means identifying the number of beds in each facility and assessing the types of prescriptions needed. “A good rule of thumb is 80 to 160 beds depending on the [mix of medicines],” says Brunswig. “If you don’t have those beds lined up in advance, make sure you do the marketing [to secure them] ahead of time.”
Ultimately, success in the LTC pharmacy market depends on offering the same kind of customer-centric service that independents are known for. “The drive behind our success has always been our desire to provide hands-on service,” says Brunswig.
But for the LTC market, he does amp it up just a bit. “All the LTC facilities have my personal cell phone number,” he admits.
Branching Out to Home Infusion and Specialty
Community pharmacies that have conquered the LTC segment often choose to expand into home infusion or specialty markets as a next step. It’s a natural progression because their LTC work has enabled them to establish relationships with the local physicians who refer patients for those prescriptions.
Of course, the decision to invest in those new markets depends on a pharmacy owner’s desire and ability to meet the unique needs of each segment. Consider these general characteristics:
- LTC pharmacies dispense branded and generic oral products, as well as some injectibles that don’t require a clean-room environment, and they often must provide special packaging and short-cycle dispensing.
- Home infusion pharmacies deal mostly with generic injectibles, while meeting strict clean-room criteria and packaging requirements. They also must earn accreditation through one of three primary accrediting organizations.
- Specialty pharmacies mainly dispense high-end, brand-name products; they also must be preapproved by the manufacturer of each product and contracted with a pharmacy benefit manager to ensure reimbursement. And they must meet strict packaging, shipping and storage requirements.
Top Considerations before Taking Action
If you’re considering developing additional sources of revenue from alternate site pharmacy, keep these points in mind:
- Local demographics. It’s important to identify the unique opportunities inherent in your local market. For example, if your business operates in an area with a large senior population, LTC pharmacy may be right for you. Similarly, an urban environment with a high concentration of infectious disease specialists could lead to a significant home infusion business. But rural pharmacies also can offer home infusion services to patients who otherwise might have to commute two or three hours for medications.
- Clinical education. Make sure you understand patient needs as they relate to the different product lines. Providing home infusion and specialty services, in particular, requires a great deal of patient interaction and training.
- Financial planning. Like all business ventures, performing due diligence is critically important. However, for alternate site expansion you’ll want to pay careful attention to the needed investments and the timing of your returns within each segment. It’s vital to understand how and when you will be paid.
- Accreditation and approval. To venture into alternate site pharmacy, you must comply with the unique accreditation and approval processes for each segment. Industry associations and GPOs can provide critical information and guidance about the requirements for dispensing home infusion and specialty products.
Choosing a Great Partner
A final tip: Pharmacies must pay extra attention to operations management in alternate site segments, so it makes sense to link up with a company like McKesson Health Systems that has developed unique expertise. For more information, visit www.mckessonBOP.com/alternatesite/.